Monday, June 26, 2006

Earlier this month, I mentioned how things seemed almost "too easy" for bears. Well, I would like to have that problem again.

We seem to be, over the past several weeks, sort of stuck around 11,000 on the Dow. The red line I've drawn divides bullish control (upper) and bearish control (lower). It's just a struggle between the upper and lower halves.

I imagine until there's some clearer direction, my posts will be less verbose and less frequent. Because I don't want to talk about the market just for the sake of talking about it. As long as we're stuck in neutral, there's not a heck of a lot to say.

41 comments:

while my day is spent looking at hundreds and hundreds of charts (with a very nice lunch break, possible round of golf, and flirting with beer girls), I kind of like this stalemate that we find ourselves in. Sure nothing is as great as making money (like when a trend is defined and movement happens). But a quiet speculative week before the FED? I'll take it as a nice long holiday before the real action happens.

Does anyone else feel that we are just finding ourselves in a premature rumblings before another market tumble?

Although my patience is being tested with the puts I currently have (while long term), after today's little bull roar.

I've only found a couple of speculative shorts (technical only) that MIGHT be decent, but certainly not convincing in these stagnant market conditions. Take a look at DO, ESV, and OMNI for some in the O&G sector. Most of those moves have been on the back of some M&A activity, while NGas futures have been dropping like a rock. Notice the low volume climb and notice the resistance levels above. Could be a nice 3-5% short for any of those. Of course, depending on Thursday's news, anything can happen.

I find myself feeling "left behind" by the market in the last couple of days. Plenty of stocks that I have on my watch list have risen 10-20% in the last week or so, although they are drifting up on low volume. But hey, 10% is 10%, and I'm feeling TOO cautious by not taking any chances.

I have been sitting in cash for 2 weeks now, waiting for the Fed to speak, and all the while missing out on some nice relief rally moves.

If the Fed goes 1/4 point and restates the fact that they'll "analyze data as it comes in", then I predict the market will rally. If they go 1/4 point, but indicate a possible pause, then the rally will be even stronger. If they go 1/2 point for some reason, the market will tank.

My crystal ball says they'll go 1/4 point and restate the fact that they'll analyze data as it becomes available, offering NO indication for future pauses, but certainly keeping a pause on the table.

Frankly, inflation hasn't decreased at all since last year. These 1/4-point hikes are doing absolutely nothing. In my opinion, the Fed NEEDS to go 1/2 point, but they won't do it. We WILL find ourselves in a period of stagflation, because the higher rates will kill businesses, and energy costs will keep inflation going higher.

Today I noticed that I could not pull up YMU6, ZNU6, YGQ6, YIN6 but could pull up ESU6, SN6, WN6, etc...seems like the mini-dow & mini-metals weren't working as free, EOD snapcharts.

I chatted w/ Frank T in your online chat and he said only Gold members get futures data. I've been receiving EOD intraday futures data from your site for a while and think Frank T is wrong. I still can get the EOD intraday data for all except the mini-dow and metals listed. Could you figure out what's going on? Your tech support doesn't seem to know what's what....very frustrating!

I don't see how the market will rally. They've said the same thing the last three times at each meeting (data data data), and they've been increasing the rates as usual. Did we see a rally on any other time? If we did, it was very short lived.

What is it about this time that would make you think a rally would happen? Nothing has changed since last time.

Thanks, Anon, for your thoughts on market direction after Fed Speak. (What name will you use next?--I vote for Irving) Any other old timers want to give us their thoughts on market movement after the quarter/half point hike. I hope something happens, this is getting boring. . .

Stockshaker: I wasn't being sarcastic. After the huge dump in the last 2 months, the market is looking for ANYTHING in the news to get it going. Case in point: 2 non-essential (and non-Dow components) earnings reports last week caused the Dow to climb 200 points in 2 days. Another case: M&A activity in the O&G sector (and today with metals) caused more upticks in the broad market. Granted, this week's activity will be muted, but the direction was clearly UP, not down. In other words, the sellers are sitting on the sidelines (or selling off very lightly) for now. If the news from the Fed comes out "as expected", then the sellers will let the buyers drive up the prices in the short term.

The market doesn't care WHAT the Fed does, as long as the uncertainty is taken out of the equation. Then I suspect the market will climb. It has already broken the downtrend and is moving sideways. Also, the NAZ:SPY ratio is breaking out of a falling wedge, which will be very bullish when the uncertainty of the Fedspeak is removed on Thursday.

Anyways, I truly feel that the huge decline in the broad market in the last 2 months is "what's different" this time around. Before the previous meetings, no selloff occurred, which led to the rate hikes being a non-event.

But I could be wrong. I'm just going by charts and what I perceive as overly-cautious sentiment against a backdrop of potentially great Q2 earnings and "decent" forward profitability in the big caps, which would drive the market up in the short term.

Will we eclipse 11,723? Probably not. But the rally should be good enough to capture nice gains in the meantime.

you still have to favor the bears right now. we're in a rising interest rate environment and the market is still trending down. the lack of a confirmation of the rally is a big plus.

it won't be easy for the bears. like i said before, in bear markets only 10% of the action is downwards, the rest are sideways and up. the down days are just as magnificent as some of the bear rallies. i expect the Nasdaq to test the 2150 level again and fail.

Boring to some, but exciting to me! I'm tracking DIA and for today was looking at its high to be no more than the trendline down from the high of the last few days (110.45) and no lower than the low I was tracking (closes for the same days @ 109.61).

What got me is that it closed high for the day compared to the low I expected, but I don't think that is bad. Baring anything unusual, I would expect tomorrow to be almost nothing but down due to the weak trading today and it is hanging out at a 1 month support/resistance line.

Well I made some money today - hope you all did too (even the ones in cash should be in money market accounts). Sold my GM and XLE this afternoon (for a good profit) and am currently holding a junior miner and TEVA (maker of generic zocor). (I dumped MRVL - it was not behaving the way I expected - I made some money on it and probably should have held into July but oh well- never look back). I also bought a load of the new inverse Q's (ETF PSQ) to hedge TEVA for the rest of the week. I'll sell the junior miner off tomorrow (that's going to take a little while) and this is where I will sit through Thursday.

My rationale is this: if the Fed does the right thing and raises .5 TEVA goes nowhere since it is non-interest rate sensitive and PSQ goes up. If the Fed passes (they won't) then TEVA goes up and PSQ is stopped out for a small loss. If the Fed does the quarter (they will) then that has already been marked into the market and nothing will happen one way or the other (a point here or there and it'll be a wash).

I think this afternoon was Mr. Market basically thumbing his nose at Benny.

The introduction of these new inverse ETFs is allowing me to try something new. We'll see how it works out.

Tomorrow at noon I begin my little "Fed week vacation." I won't even look at the market again until Friday - I'm going to go do some real gambling.

I expect DIA to close about 110.24-110.34 if it is another sideways day with the low being 109.58. However if moderately active, 109.58 will be where it closes with the low dropping to 109.24. Absolute high is 110.80, but a more likely high will be 110.53

DIA looks like it should finish its rounded top pattern to me, ready to head down for the next week or more. Signs are definitely pointing down, or worse, flat to slightly up over the next week.

All that from about 20 lines drawn on my chart. Intersecting lines are always the most interesting, doubly so when it's a fib line. I'm glad Tim turned me onto those, and seeing how they do hit a point time and time again is very interesting.

Tony, good points, but I think the selloff that we saw within 2 months was the market appreciating that rates are going up, no one knows when it will stop (since its data dependant, as its always been), and this will affect the broad market over time.

We didn't see this before becasue everyone believed that a buffer zone was set and that initial rate hikes were non event at the time, because the data still looked good.

now, we are (finally) seeing some data that shows softness BUT not enough softness that hikes will stop.

I don't know when it will stop, and i think it will be hard to say when it will stop. Unless Ben has some crystal ball like John has with stock picking (all in good fun John) I think he'll overshoot, because its not just housing that will get affected but commodities too.

And softening commodities maybe a little harder - and if that goes, all hell breaks lose.

and i hardly doubt that today's M+A and last weeks whatever is anything to base opinion on because it was with little volume, and that means that its probably just intermediate noise.

HOWEVER, if the dow gets above 11,100, and SP500 gets over 1256 I'll be buying calls, and covering puts for the short term.

But I hope the bear prevails because I all these bear call spreads, where I purposely don't have to monitor them after it falls before the strike, because last months red is funding my europe trip at the end of this month.

C'mon Bears, do it for Spain!

But I like having some Bulls in this blog, evens things out a little bit.

Hey, I'm definitely no bull. But I always try to see things from the bullish perspective because it gives me a more well-rounded view of the situation.

There can definitely be a case made for the bulls. Good earnings, solid economic growth, and moderate interest rate increases throughout the rest of 2006. It may be a "flat" market overall, but certain sectors will probably do very well for the rest of the year.

If rates don't climb too high, and the global liquidity stays high, then commodities might rebound hard and boost their related stocks to outstanding levels by year end.

I'd like to be more bearish, but I'm finding it difficult to develop a case for the market to sell off now. There just aren't any catalysts. And if the Fed goes 1/4 point this week, that won't be enough to start the selloff, either. I think at this point, the market is pretty numb to all the inflation talk. If the Fed doesn't back up their talk with serious action (like 1/2 point hike), then the market will steamroll forward through the summer. If you would have asked me 2 months ago (or even before that) if I thought there would be a summer rally, I would have said you were nuts. Now I think a stronger case can be made for a summer rally more so than a summer funk.

Charts are one thing, but market sentiment (reflected in P/E ratio) is another. Right now, I don't think the market P/Es are high enough to cause people to be concerned. And if you can't force P/E compression on the market, then there won't be a selloff in this climate.

Tony like you im sitting on about 95% cash now waiting for a dip and like you I missed out on the the run from last wednesday till today. Nearly every stock like you mentioned is up 5-15% and to get in now ahead of the federal reserve meeting in my opinion is TOOOO risky. Would rater wait until thursday afternoon to see what the federal reserve does which my guess is raise .25bp WITHOUT A PAUSE. You mentioned that either way with a .25BP raise and no pause that the markets will rally. Its tough to say what will happen, I think if there is a major rally it will be short lived. To think these markets are headed back to 6 year highs is crazy.

John im thinking of picking up either PSQ or MYY ahead of the fed meeting, not many shares maybe 200-300 just to play it safe. If they go 50 bp those inverse etfs could increase 2-3%. However I dont think PSQ is a good hedge against TEVA. I would consider buying PSQ long and buying maybe a certain sector ETF like a semiconductor SMH or even going long IBB or PBE which are biotech ETFs. I agree a vacation would be nice from these markets. They have just been boring these past few days, maybe because i hold no positions and waiting for a selloff to get back in.

By the way what price did you get PSQ at. Im looking to get it under $69 before the fed meeting which i highly doubt. But ill go for $69.50

69.90. I stopped worrying about price a long time ago (after missing 80 or 90 trades that turned out to be decent - not perfect - but decent).

I know PSQ doesn't really hedge TEVA. I know from my reading and past study that health and health related (especially drug) stocks are not too affected by interest rates. So I don't expect TEVA to do anything. I figure if the market goes down hard on the 10% chance of a .5 raise I'll do well with PSQ if not it probably won't go anywhere. I don't know because the stock has been out for only a week now. I do know from experience that the inverse funds from Rydex and Profunds weren't that volatile in regard to news.

No crystal ball - just the candlesticks and a list of favorites (oil & gold mostly) that are in the ascend right now. Buying the dips and selling the rips.

Then I add on based on my experiences and the reading I do every day (TEVA, MRVL for example). I try to be creative. I also play gap-ups/downs for dollars and dimes a couple of times a week. For these I set really close stops and let them go if they go. Just scalping - some folks do better at it than others - I still need practice but I'll never lose more than $50. (One bet at the blackjack table is how I look at that). Every week or so I catch a huge winner and that makes it fun.

I'm trying not to get a big head right now. DIA hit just over my predicted high of 110.53, real high in the morn was 110.59. I also had figured that would happen first thing in the morn which it did.

The current low is 109.43, pausing/testing between 109.81 and the 109.58 line, and it looks like it is still going down. The next test: will it hit the 109.28? Only time will tell as it tests the 109.58 line yet again...

Damn! I'm loving my short on MRVL. I was getting a little nervous as it kept pushing up against its downtrend. Not that I can take credit for the news...but I'll ride it! It's just made a new low, after a lower high. If it closes below 41.50 it's gonna keep going down.

Nice to see this trading range break apart. Look at how awful the semiconductors have performed. the patient bears will be rewarded soon. stocks are in overbought. perfect conditions for the next leg down.

I like this blog because everyone has a hot stock tip, and I really appreciate that because the collective group we have here really have some interesting stuff to say.

I applaud. and say thanks not just to Tim, but all of you guys as well.

But: today, I have a hot stock tip for everyone.

THE WHOLE MARKET.

I can list at least fifty stocks right now that are prime for a take down pending negative news. But becuase a lot of these are sideways the last week, ALL are also poised for a beauty rally if that may be in the stars as well.

Thats what I meant - today's action was pretty big numbers wise, but I haven't really looked at volume, and if we are still trading on non convincing volume, we are still just seeing noise.

Im looking at the Dow, and I see a failure of breaking out on a resistance level of around 11,100.

I also see the technical oscillators starting to roll into negative - meaning downhill ahead.

If thats the case, our support level is around 10,720.

SP500 and nasdaq are also in a range, and all technicals are similar in direction.

HOWEVER!

The Nasdaq is flirting with disaster - to me looks like its starting to break multiyear support channel.

BUT what really messes up techncials is news.

AND WE ALL KNOW there is huge news to come.

I am still holding onto puts, and bear call spreads, but have close targets to exit the trades, becasue I assume, after the fed releases the news we will see knee-jerking, all hell break lose, type of movement.

But longs? Why fight the market? My plays are more longer term, becuase I don't like watching the Dow flicker points. There are some people who can find some longs, because they are in shorter plays (daily trades). and of course, there are some stronger markets.

I am looking at the QQQQ's (I use this stock for monthly income), and I see a much substantial volume compared to the last couple days. I also see a very nice bearish engulfing pattern. But the volume is still less than its 30 day average volume, which is something to also consider ... all this is noise? we'll know in a couple days.

stockshaker what a close, i was looking for a day like this but not today, thought maybe after the federal reserve meets things would start getting volatile, this was too soon. As for the nasdaq breaking down I think its heading towards 2050, can easily take out its 6/14/06 low. Beside that I was going to take a position out on PSQ at $69.50 when the markets were in rally mode but decided not too. This whole federal reserve 2 day meeting has me completely sitting on the sidelines which is costing me.

Im going to wait on PBE, at the moment Im watching PSI and see how low it can go before it just looks too oversold, Im looking at $16 or less as a buy.

I basically follow ETFs more than I do stocks. So most discussions in here will be about ETF and which ones look oversold and overbought.

If investors do not like what the federal reserve has to say I think Dow could easily be under 10800 and nasdaq under 2075 by next week.

The current low is 109.43, pausing/testing between 109.81 and the 109.58 line, and it looks like it is still going down. The next test: will it hit the 109.28? Only time will tell as it tests the 109.58 line yet again...

Little did I think that DIA would close at 109.26 today! That was a long-shot in my view with how the market was going.

Time to evaluate this wonderful news and see if it is time to cash the chips or ride it out!

But cash is actually smart. I haven't made any good money for a good week, except for time decay on teh options I sold. Most of mine are sideways. The best time is (obviously) on moves.

You will see a move on thursday/friday. and if you are cash, you are poised to take action quickly. Whereas if Im on the wrong side of the trade ... well. I'll get out, get on a new wagon, and make up the loss, tack on some more profit, and I'll be back posting some new preachings.

think were going to selloff again today....nothing to push the markets higher. OIL inventory data is due out in 9 minutes and it really doesnt matter because the last 3 weeks there were buildups and oil still rallied......

Hey, while searching for widgets for my blog, I stumbled upon www.widgetmate.com and wow! I found what I wanted. A cool news widget. My blog is now showing latest news with title, description and images. Took just few minutes to add. Awesome!

Tim Knight founded Prophet.net, considered by Forbes and Barrons to be the #1 technical analysis site (sold in early 2005 to INVESTools, where he is the SVP of Technology now). Tim has been trading actively since 1987 and focuses mostly on option positions. He is a dyed-in-the-wool technician, leaning heavily on marked-up charts for his analysis. The contents of this blog are NOT to be considered investment advice, and you should know Tim may or may not have positions in the securities mentioned here.